Friday, February 25, 2000
Quota cuts endanger tobacco farms
A few fighting; Some quitting
BY SUSAN VELA
The Cincinnati Enquirer
CARROLLTON, Ky. — Every morning, tobacco growers stream into Welch's Riverside Restaurant here to be among their own.
The restaurant is owned by Ernest “Junior” Welch, a tobacco grower. He has decorated its walls with pictures, farming tools and signs — testimony to Kentucky's rich tobacco history.
Tobacco growers have found a haven here. They eat, share a few words with Mr. Welch and talk about the latest tobacco news before heading out to their farms or to their “public work,” a colloquialism for nona griculture employment.
Judging from the news, Mr. Welch predicts that this year could be a turning point for many of these growers.
The U.S. Department of Agriculture recently ordered growers in Kentucky and the entire burley belt to grow and sell 45.3 percent less tobacco next year than they did this year.
That will be the largest drop in the tobacco quota in a dec ade. And it is expected to take a mighty toll, not just on farmers, Mr. Welch says.
This spring, farmers will buy less seed and equipment. This summer, some of the surrounding country roads will be barren of the attractive crop that normally lines them.
This fall, at least two of the city's seven burley auction warehouses won't reopen. And around Christmas, farmers will finally feel the true pain of the cut; that will be when they sell their crop and get roughly half of this year's income.
“We want to raise a crop, and then you can't get no money for it,” said Mr. Welch, sitting at his counter before a warm plate of eggs, ham and biscuits.
“There'll be no farmers left after next year. I don't think they can survive this one.”
This is the town where, two years ago, President Clinton visited and promised growers that their livelihood wouldn't be extinguished. Now feelings of betrayal are rife around here. Mr. Welch said growing tobacco should be his right, but federal policies are eroding it.
Tobacco experts offer many reasons for this year's mandatory quota cut.
The U.S. Department of Agriculture sets quotas to prevent the flood of too much tobacco into the market. The department factors into the quota how much U.S.-grown burley tobacco companies say they intend to buy.
But demand for American-grown burley is slipping for several reasons, experts say.
• Tobacco companies are importing more burley.
• Cigarette prices are rising.
• Anti-smoking sentiment is strong.
• Tobacco companies will have to spend $200 billion over the next 25 years on major court settlements.
Growers and tobacco experts say they've seen major quota cuts before that didn't wipe out farmers; the cuts usually have been followed by quota increases.
The pertinent questions this time are: When will the next rise arrive and how many growers will be around to see it?
Not Dale Wheeler, 39, of neighboring Trimble County. On Thursday, he and his father put 5,000 pounds of tobacco up for sale at the Kentuckiana Tobacco Warehouse in Carrollton. Tobacco company buyers ignored it, leaving the Burley Tobacco Growers Cooperative Association in Lexington to purchase it for its pool.
Pool tobacco is considered to be a lower-quality leaf that can't fetch a cent more than the price supports, which have ranged this year from $1.86 to $1.97 a pound for tobacco's three grades.
Seeing this year's crop go into the pool, Mr. Wheeler said he has few regrets about deciding to leave the tobacco-growing business. The Eastern Kentucky University graduate has decided to move to Illinois, where his wife recently got a hospital management job. He doesn't know what he'll do for employment.
“It's going to be a dramatic change,” he said.
Another quota cut is expected to be announced next year because of slipping demand for tobacco. But many growers are also blaming the tobacco companies' push for contract farming.
After this year's quota cut was announced, Philip Morris Cos., the largest purchaser of U.S.-grown tobacco, announced that it was starting a program involving short-term contracts with a limited number of growers.
The company will buy a participating farmer's entire crop, but the contracts would only be for up to three years. Growers say that system would confine them to certain kinds of tobacco, and it would provide no long-term security.
“We at Philip Morris U.S.A. are concerned about American farmers and the availability of American-grown tobacco,” said David L. Milby, a Philip Morris executive, in a statement.
“We believe that this ... program will provide participating burley growers with a reliable and steady source of income for the upcoming growing season. It will help them plan with confidence and use their assets more efficiently.”
Washington, D.C., lawyer Alexander Pires Jr. calls such comments bunk. He represents about 520,000 tobacco growers in a $69 billion antitrust lawsuit against Philip Morris Cos., R.J. Reynolds Tobacco Co., Lorillard Tobacco Co. and Brown & Wil liamson Tobacco Corp.
The lawsuit alleges that the tobacco companies are manipulating the quota system and trying to eliminate it altogether. If U.S. market prices — currently about $1.90 per pound — drop, they would push down the global average price.
“It's all about money,” Mr. Pires said. “There are three things going on. They're all very logical.
“The industry doesn't really want domestic burley. They like it in its good quality, but it's too expensive.
“Two, they really don't like the quota system.
“Three, if you accept that burley is too expensive in their eyes and they want to get rid of it, they'll cut the quota drastically. It eliminates a very high percentage of burley farmers ... (and) gets to what they really want.”
For the U.S. tobacco grower, “it's all over,” Mr. Pires said.
“Two more (quota) cuts and they'll be done. It's all over. They're trying to break the quota system by massive cuts.”
Philip Morris officials have said that Mr. Pires' lawsuit is based on “entirely hollow” claims and that it will continue to support American tobacco growers.
In five years, from 1993 to 1998, the number of Kentucky tobacco farms dropped 24 percent — from 59,373 to 44,967 — according to Kentucky Agricultural Statistics Service. Ohio has about 8,500 growers.
Some of those who lined up to see the president also recalled how their fathers and grandfathers had urged them to do something besides grow tobacco.
But, “it's a way of life. That's all they've ever known,” said Melvin Lyons, the Kentuckiana warehouse owner.
“They shouldn't be in the position they're in now. If companies would quit importing tobacco ....”
Will Snell, a University of Kentucky agricultural economics professor, confirms that the price for U.S.-grown tobacco is two times that of foreign-grown tobacco and that U.S. tobacco companies have been purchasing about 200 million pounds of imported tobacco a year.
That is about the same amount of U.S.-grown burley tobacco that has gone into “pool” stocks this year.
There are now 479 tobacco farms and probably about 650 growers in Carroll County, which has a population of about 10,000.
The county grew about 3.8 million pounds of tobacco this year. With the average $1.90-per-pound price, that could generate about $7 million for county growers.
Mr. Welch had about $200,000 in sales, selling tobacco that he grew last year on several farms. He says most of that money will go into keeping his farms afloat and financing equipment and labor costs. He'll be lucky if, at the end, he has $10,000 left over, he said.
But, as the sign says on his restaurant wall, “We'd rather fight than quit.”
To be safe, he has plans to open a flea market and lease space to make up for upcoming losses in tobacco income. He already owns 200 head of cattle, which he's purchased over the years to supplement tobacco income. Seven head of cattle, he says, usually can make up for one lost acre of tobacco.
As he chats over his breakfast, a waitress and one of his customers light up and complain about the rising cost of cigarettes. Mr. Welch, a nonsmoker, jokes that they should quit smoking.
“I think they ought to quit raising the stuff, too,” Mr. McDowell jokes back.
But when all the laughing is done, Mr. Welch's voice drops. He touches his baseball cap a bit and reminisces about being 13 or 14 years old and raising his first tobacco crop.
It was less than an acre, he says. His only help was a one-eyed horse.
That first crop reaped $600.
Now he owns 165 acres, seven rental houses, several tractors and a house surrounded by a white picket fence.
Heck if he can stop growing the leaf.
“It gets in your system,” he said. People “don't want to quit. They're forced to quit. I'm going to hustle.”
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